Vacation rental tax making rounds on Beacon Hill

Friday

Sep 21, 2007 at 2:00 AM

By Jason Graziadei I&M Staff Writer

Legislation that would extend the local rooms occupancy tax to private vacation-home rentals remains in committee, with municipalities, seeking new revenue streams, pushing for its approval, and real estate agents opposing the new tax.

The bill, sponsored by Dennis state representative Cleon Turner, would give towns the option of extending the local 4 percent rooms occupancy tax applied to hotels, inns and bed and breakfasts, to private homeowners who rent their residences.

On Nantucket, where the proliferation of private-home rentals has threatened to push the island’s small inns and hotels out of business, the proposal has both avid supporters, and staunch opposition.

“Houses that are run as one- or two-week vacation rentals are as much a business as car rentals, or bike rentals or guest houses, and should be treated the same way,” said selectman Michael Kopko, the innkeeper of Safe Harbor Guest House. “I think it’s only fair that everyone shares the burden if they’re going to be in the business. I’ve got no problem with competition, it’s certainly hurting my business, but that’s my problem. It’s a revenue source we need that we’re not getting.”

In February, the Board of Selectmen voted to draft a letter of support for the legislation, which is currently pending before the Committee on Revenue in the state House of Representatives.

“Municipalities are constantly under pressure to seek new and/or alternative revenue sources,” the Selectmen wrote. “This option appears to be a significant source of untapped revenue, which, rather than burdening the local taxpayer, essentially allows for the collection of revenue to help offset municipal costs associated with short-term rentals.”

The current rooms occupancy tax on inns and hotels generates approximately $1 million in revenue per year for Nantucket, town administrator Libby Gibson said. While there is no official count of the number of seasonal or summer rentals on the island, proponents of the legislation argue that there is a huge untapped revenue stream from private homes operating as businesses.

“Why shouldn’t they be held to the same standards as someone who’s business is a little bigger,” said Stefanie Coxe, a legislative aide for Rep. Turner. “We’ve got towns trying to be creative and we’re trying to give them the tools to close budget shortfalls. The towns have asked for this. Why shouldn’t it be considered?”

Still, in addition to opposition from the Massachusetts Board of Realtors, island real estate agents have also voiced their opposition to the proposed legislation.

“I’m opposed to the occupancy tax on rental homes because I don’t think it’s fair, I don’t think it’s enforceable and it’s targeting a segment of the economy that generates a lot of business for Nantucket that doesn’t need to be tapped,” said Denby Real Estate owner Flint Ranney. “Some of them do act like inns and hotels, but I don’t know how you pick them out and make them pay. I don’t know how you do it unless you have a huge bureaucracy of inspectors.” Penny Dey, the president of the Nantucket Association of Real Estate Brokers (NAREB), said she hadn’t reviewed the specific language of the proposed legislation, but agreed with Ranney’s assessment of such a new tax. “NAREB’s position is, and has been, against any expansion in the rooms occupancy tax to private rental homes because they’re not subject to the same inspection and licensing requirements as commercial businesses,” Dey said. “Under the IRS tax code, I’m allowed to rent my home for two weeks and I don’t have to report it. That’s not a business.” Coxe, Turner’s legislative aide, however, said enforcement would not be a significant stumbling block in expanding the occupancy tax.

“I think it’s like any other piece of legislation that you pass – you pass it with the hopes that people will abide by the law and if they don’t, one of the ways we could look at enforcement is through the town board of health, which is required to inspect all places coming up for rentals,” Coxe said. “The Department of Revenue can take a look at board of health records and compare them with who has paid.”

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